South African investment laws - foreign investors with treaty protection may challenge proposed expropriation of land

​In July 2018, we published an e-alert setting out key changes to South African investment laws. The e-alert highlighted that as a result of a review of its investment laws, the South African government has terminated several Bilateral Investment Treaties (BITs) to which it was a party and then sought to "substitute" the treaty protections with domestic legislation, which ultimately led to the passing of the Protection of Investment Act, 2015 (the Act) in July 2018.

Although the stated purpose of the Act is to protect foreign investors in South Africa, overall, the protections offered in the Act are substantially diminished when compared to the substantive standards contained in international treaties. However, the Act has no direct effect on any protections which foreign investors enjoy under international treaties which have either not been cancelled or contain “sunset clauses”; those protections are still governed by the international instruments from which they arise.

Last week, the Department of Trade and Industry's (DTI) Deputy Director-General of International Trade and Economic Development, Xavier Carrim, briefed Parliament's Ad Hoc Committee to Initiate and Introduce Legislation amending Section 25 of Constitution on the possible impact of land expropriation without compensation on foreign investors from countries that have bilateral investment treaties in place with South Africa.

​ Mr Carrim noted that if the land was expropriated from a foreign investor who was based in a country that had a bilateral investment treaty in place with South Africa, the investor could invoke a legal challenge against the government under the treaty, if they believed the compensation amount was not fair.  The DTI also indicated its understanding that international treaties trump the law of the land and government cannot invoke internal law as a justification not to meet international treaty obligations.

Termination of a number of South Africa's bilateral investment treaties commenced in 2013, but the treaties terminated each contain a “sunset clause”. Following formal termination, already existing investments were protected under those bilateral investment treaties for a period of time varying from 10 - 20 years.

Mr Carrim confirmed Government has formally terminated 12 agreements, including those with European Union countries and Argentina and intends to deal with four of its remaining treaties concluded with African countries – Nigeria, Zimbabwe, Mauritius and Senegal – through the African Continental Free Trade Agreement. It is still in discussions regarding its agreements with China and Russia. Two agreements – with Cuba and South Korea, are awaiting permission from Parliament to be terminated.

In addition to bilateral investment treaties, investors could be covered under international law by regional treaties, such as the Southern African Development Community’s Finance and Investment Protocol.

The Committee confirmed that Parliament intends to finalise an amendment to section 25 of the Constitution at the end of March. There is likely to be extensive public engagement on this matter.

In our previous e-alert we set out some key features of the Act which any investor should be aware of. These can be viewed here.


These materials are provided for general information purposes only and do not constitute legal or other professional advice. While every effort is made to update the information regularly and to offer the most current, correct and accurate information, we accept no liability or responsibility whatsoever if any information is, for whatever reason, incorrect, inaccurate or dated. We accept no responsibility for any loss or damage, whether direct, indirect or consequential, which may arise from access to or reliance on the information contained herein.

© Copyright Webber Wentzel. All Rights reserved.

Webber Wentzel > News > South African investment laws - foreign investors with treaty protection may challenge proposed expropriation of land
Johannesburg +27 (0) 11 530 5000
Cape Town +27 (0) 21 431 7000
Validating email against database, please wait...
Validating email: please wait...
Email verified: Please click the confirmation link sent to your mailbox, also check junk/spam folder. If you no longer have access to this email address or haven't received the verification email then email
Email verified: You are being redirected to manage your subscription
Email could not be verified: Please wait while you are redirected to the Subscription Form
Unanticipated error: Saving your CRM information Subscription Form